State capacity in the South Caucasus: How do you measure how much the state can do?
The lack of agreement on indicators and definitions is due to the inherent multidimensionality of the concept. This multidimensionality is well exemplified by Fjelde and De Soya’s 2009 article which identifies state capacity as a state’s ability to coerce, co-opt, and cooperate with society. While the authors provide indicators for these capacities, their schema seems more to describe a state’s relationship and interactions with citizens rather than state capacity in and of itself.
The fact that different scholars have theorized different capacities including fiscal capacity, bureaucratic-administrative capacity, and coercive capacity as component parts of state capacity further illuminates the multidimensionality of the concept. This blog post looks at three of the many possible indicators which could be used to gauge state capacity in the South Caucasus: revenue excluding grants as a share of GDP for fiscal capacity, taxes on income, profit, and capital gains as a share of total revenues for bureaucratic-administrative capacity, and military expenditures as a share of central government expenditures for coercive capacity. So, how strong are the South Caucasus states?
Fiscal capacity is considered one of the most important state capacities by most authors as without the financial means to accomplish a stated policy, that policy will likely never be realized in practice. The graph below presents World Bank data for state revenue excluding grants as a share of GDP and shows how much the South Caucasian governments collect from their societies. What appears most prominently is that Azerbaijan’s fiscal capacity far outstrips that of Georgia and Armenia, which exhibit similar levels of extraction. It is important to keep in mind here that revenue consists not only of taxes but also funds collected through fines, fees, and resource rents. The latter are particularly important for Azerbaijan as the government received 54% and 65% of state revenues from oil and gas in 2005 and 2011 respectively. Without its oil wealth, Azerbaijan would collect significantly less in revenues.
Definitions of bureaucratic-administrative capacity often center on a state’s ability to collect and manage information (Hendrix, 2010). This capacity is central to a state’s ability to act and likely enables a state to have fiscal and coercive capacity. For example, if a state is unable to gather information on potential militants within its territory it will be unlikely that it can coerce or co-opt them into compliance. In order to successfully cooperate with society, information gathered must be channeled into usable and comprehendible forms which enable the government to act.
Income, profit, and capital gains taxes as a share of total taxes are a useful indicator of bureaucratic-administrative capacity. While at first glance it may be taken to indicate fiscal capacity, income taxes are more closely related to bureaucratic-administrative capacity, because this form of taxation is both a relatively difficult and relatively desirable tax to collect (Rogers and Weller, 2014). The desirability of income tax stems from the fact that it generally provides a revenue stream which does not drastically fluctuate. In most circumstances, however, it is a relatively difficult tax to collect (though the system of income tax payment by employers has lowered this difficulty in Georgia, Transparency International Georgia has noted that non-compliance with income tax remains problematic). As such, the share of income tax as a percentage of total state revenues proxies how well a state can extract from and manage information on its population. The graph below presents taxes on income, profits and capital gains (two other taxes which are similar to income tax) as a percentage of total taxes collected. The graph demonstrates that Georgia’s bureaucratic-administrative capacity on this measure is higher than that of Armenia or Azerbaijan. While Azerbaijan’s relative weakness in this sector is likely caused by hydrocarbon revenues, Georgia’s relative strength likely comes from the reforms in tax collection and enforcement, which started with the tax code passed in 2005.
A final important capacity of state is its ability to coerce its population; without the capability to put down paramilitaries or suppress violent groups, a state can quickly devolve into chaos. Taking military expenditures as a share of central government expenditures as an indicator of coercive capacity, the graph below gives a possible indication of coercive capacity. This indicator, though, also likely describes the changing relative importance of coercion to each state over time, as one would expect the share of total expenditures dedicated to military expenditures to increase if security issues became relatively more important – hence Georgia’s relatively high expenditures in 2008, which are largely a result of the 2008 August War with Russia. When looking at the figures, it is important to note that Azerbaijan’s budget is significantly larger than either Georgia’s or Armenia’s and as such has a much larger absolute level of coercive capacity.
This blog post has looked at three of the many possible indicators of state capacity. For readers interested in the subject, this 2010 article by Cullen Hendrix goes through a wide variety of indicators, although the data set used does not include any of the South Caucasus countries.
Have any ideas about other indicators? Join the conversation on Facebook or at CRRC-Georgia’s office on December 10th for the Works-in-Progress talk:State/party capacity and constraints on state action: Operationalizing and indexing state capacity in Georgia and Armenia.
By Zaur Shiriyev
By Yevgenya Jenny Paturyan
Interview by Dustin Gilbreath
By: Dustin Gilbreath
CRRC’s third annual Methodological Conference: Transformations in the South Caucasus and its Neighbourhood
[Note: Social Science in the Caucasus is publishing the work of six young researchers who entered CRRC-Georgia’s Junior Fellowship Program (JFP) in February 2015. This is the second blog post in the series. Click here to see the first blog post.]
CRRC Methodological Conference on Measuring Social Inequality in the South Caucasus and its Neighborhood
The recent history of the South Caucasus as seen by the world’s media – Part 1, Armenia and Azerbaijan
By Till Bruckner
By Dustin Gilbreath
The Caucasus Barometer survey regularly asks people, “Which of the following statements do you agree with: “‘People are like children; the government should take care of them like a parent’ or ‘Government is like an employee; the people should be the bosses who control the government.’” Approximately half of the population of Georgia (52%) agreed in 2017 with the former statement and 40% with the latter. Responses to this question have fluctuated to some extent over time, but overall, attitudes are nearly equally split.
Each government of Georgia has had a wide range of successes; but how do the public see these successes from Shevardnadze’s time to the present?
When Eduard Shevardnadze’s government is mentioned in Georgia today, it tends to be connected with the dark times Georgia experienced in the 1990s. Yet, his government also saw the introduction of the Georgian Lari, resulting in a stable exchange rate. The United National Movement is credited with fighting petty corruption, and oversaw a period of relatively high economic growth, while at the same time failing to avoid the disastrous 2008 war with Russia. The Georgian Dream government too is seen as having had some success, for example, in reducing the prison population, from what was among the highest in the world. At the same time, incidents like the Gavrilov Nights and issues around election integrity are often cited as failures.
While each Georgian government has had a range of successes, as described in another post published today, they have each had their own spectacular failures.
From Shevardnadze’s failure to establish state power outside Tbilisi, to the human rights abuses under the UNM and Gavrilov’s Nights under Georgian Dream, every government has had significant shortcomings.
While these are some of the most memorable, little research has been conducted on what the public thinks are the largest failings of each government. Data released on Tuesday from a CRRC Georgia survey conducted in partnership with the Levan Mikeladze Foundation and Carnegie Europe provides a picture of the public’s views of the largest successes and failures of government.